So Much for Early Retirement

Canadians expect to work longer and will likely face a lower standard of living when they finally do retire — as private pension plans become increasingly rare, leaving much of the obligation of saving to workers, a clutch of retirement studies out Wednesday found.

Far fewer Canadian adults — just 27% — expect to retire by age 66, compared with 51% just four years ago, according to Sun Life Financial’s “Unretirement” index.

And nearly 6 million working Canadians can expect to see a drop of about 20% in their living standards when they retire, CIBC’s economics group said in a research report.

HSBC, meanwhile, found as part of a global study that average retirement in Canada is expected to last 19 years, while average savings are expected to last for only 11.

The recent barrage of retirement studies from a host of firms who sell savings products comes just ahead of a deadline for savings-based tax relief in Canada. Canadians have until March 1 to contribute to a registered retirement savings plan for the 2012 tax year.

The Sun Life index, based on a survey conducted by the Ipsos Reid research firm, showed that 26% of Canadians expect to have full-time jobs at age 66, while 32% expect to be employed part time. The majority – 63% — say they’ll be working because they have to, not because they want to.

“The aftermath of the financial crisis of 2008 has had a lasting impact, with more Canadians expecting they will need to work longer,” said Kevin Dougherty, president of Sun Life Financial Canada.

CIBC found that Baby Boomers are positioned to maintain “virtually all of their pre-retirement consumption patterns,” while their children are “much less well positioned,” because of lower savings rates and the erosion of private pension plans. CIBC estimates the annual savings rate in Canada is at 4%, down from 20% in the early 1980s.

HSBC said about 55% of its global working respondents aren’t preparing adequately for a comfortable retirement, with 19% saying they aren’t preparing at all.

For Canada alone, 23% aren’t at all readying for retirement, HSBC said. Some 42% of Canadian respondents said they have never saved for retirement, including 47% of 55-to-64-year-olds.

“Higher debt levels are pushing Canadians to prioritize immediate needs and wants above longer-term financial health,” Betty Miao, head of retail banking and wealth management at HSBC Canada, said in a release.

Canadians have racked up historically high levels of household debt, as exceptionally low interest rates have encouraged borrowing. Canada’s household debt-to-income ratio hit a fresh record high of 164.62% in the third quarter of last year.

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Canada Real Time provides insight and analysis into what’s making news in Canada, a country punching above its weight on the world stage thanks to its vast resources and strong banking sector. Drawing on the expertise of The Wall Street Journal and Dow Jones Newswires, we take a look at developments in fields ranging from business to politics to culture. You can contact the editors at canadaeditors@dowjones.com